Accountancy Part AReconstitution of Partnership Firm: Retirement and Death

P, Q and R are partners sharing profits equally. On 31st July, 2022,…

P, Q and R are partners sharing profits equally. On 31st July, 2022, R died and his share of profit till the date of death is to be calculated on the basis of turnover. The turnover for the year 2021-22 was ₹6,00,000 and the rate of net profit on turnover is 10%. During the year 2022-23, there is an expectation of 20% increase in turnover. Calculate R's share of profit till the date of death.

Answer & explanation

Correct answer: option 1

The correct answer is Option (1) → ₹8,000

R’s share of profit up to the date of death is worked out on the basis of turnover.

Expected turnover for 2022-23 = ₹6,00,000 × 120/100 = ₹7,20,000

Turnover from 1st April to 31st July (4 months) = ₹7,20,000 × 4/12 = ₹2,40,000

Profit on it at 10% = ₹24,000

R’s share (profits shared equally) = ₹24,000 × 1/3 = ₹8,000

NCERT (2026-27 edition):
Death of a Partner – “… Hence, in case of a partner, his claim shall also include his share of profit or loss, interest on capital, interest on drawings (if any) from the date of the last Balance Sheet to the date of his death of these, the main problem relates to the calculation of profit for the intervening period (i.e., the period from date of the last balance sheet and the date of the partner’s death. Since, it is considered cumbersome to close the books and prepare final account, for the period, the deceased partner’s share of profit may be calculated on the basis of last year’s profit (or average of past few years) or on the basis of sales.”